2009年-世界发展银行全球_Ethiopia_-_Public_Finance_Review_97页_121mb

Summary of Ethiopia Public Finance Review (2009)

Core Content

The 2009 Ethiopia Public Finance Review (PFR) is a comprehensive analysis of Ethiopia's fiscal policy, the impact of inflation on public budgets, and the effectiveness of financing modalities in the rural water supply sector. It serves as an analytical input to Government-Donor dialogues and is part of the World Bank's efforts to support poverty reduction and economic management in Ethiopia.

Main Topics and Chapters

Chapter 1: Fiscal Policy — Performance and Outlook

• Fiscal Performance Overview:

  • Public sector expenditures have grown, particularly off-budget spending, which has financed Ethiopia's rapid growth.
  • However, this growth has posed challenges for macroeconomic management.
  • The report emphasizes the need for greater transparency and accountability in the operation of public enterprises (PEs) and extra-budgetary funds (EBFs).

• Key Fiscal Trends:

  • Government spending as a share of GDP has declined over the last five years.
  • PEs and EBFs have significantly expanded, with their combined investment programs surpassing the capital budget of federal and regional governments in FY09.
  • The fiscal deficit was initially set at 2.1% of GDP but was reduced to 1.1% due to fiscal adjustments and a shift in focus towards macroeconomic stability.
  • Domestic borrowing was reduced to zero, and the fuel subsidy was removed.

• Challenges in Fiscal Policy:

  • The low buoyancy of domestic revenue remains a critical weakness.
  • Domestic revenue to GDP fell from 12.6% in FY03 to 8.9% in FY09.
  • Non-tax revenue performance is also poor.
  • There are concerns about the shrinking ratio of expenditures to GDP, and the stagnation of pro-poor sector spending.

• Fiscal Federalism and Service Delivery:

  • There are signs of both progress and reversal in service delivery through fiscal federalism.
  • Vertical and horizontal imbalances persist, with the local revenue share of regional spending declining from 19% in FY07 to 15% in FY08.
  • The horizontal imbalance has also worsened, with the average coverage dropping by about 5 percentage points in one year.
  • The new federal block grant formula needs refinement for effectiveness.
  • Regions and woredas should adopt a results-based planning and budgeting process.

• Recommendations:

  • The Government should create institutional incentives, improve planning efficiency, and build local capacity.
  • There is a need to reform tax policy and administration to increase domestic revenue.
  • Tax holidays for new investments and regional autonomy in tax policy and administration should be examined for effectiveness.
  • The current industrial policy leads to unnecessary revenue losses due to subsidies for both pioneer and imitator firms.

Chapter 2: The Fiscal Costs of High Inflation

• Objective:

  • To assess the impact of inflation on public budgets, particularly in the road, education, and health sectors.

• Impact of Inflation:

  • High inflation has sharply increased the cost of creating and maintaining public infrastructure and delivering public services.
  • The report highlights the need to raise awareness about the effects of inflation on public finances.

• Sector-Specific Effects:

  • Road Sector:
    • Unit costs and input prices have risen significantly.
    • Inflation has increased the cost of road construction and maintenance.
  • Education and Health Sectors:
    • Inflation has affected salaries and non-wage recurrent expenditures.
    • Capital expenditures have also been impacted, leading to overall budget strain.

• Policy Recommendations:

  • The Government should address the fiscal costs of inflation by improving budget planning and forecasting.
  • Adjustments to civil service salary scales should be aligned with inflation rates to avoid budget pressures.

Chapter 3: Financing Modalities for Rural Water Supply

• Study Objectives:

  • To evaluate the effectiveness of various financing modalities in the rural water supply sector.

• Financing Modalities:

  • The report reviews the structure and composition of domestic revenue, including direct and indirect taxes.
  • It assesses the adequacy of existing financing modalities and their impact on service delivery and capacity building.

• Key Findings:

  • There is a need for more predictable and integrated financing arrangements with decentralized annual planning processes.
  • Disbursement and replenishment mechanisms to regions and woredas require improvement.
  • Procurement procedures in the sector have not been fully optimized.
  • The sustainability of rural water supply schemes is influenced by the availability of finance, skills, and spare parts.

• Survey Results:

  • The quality and sustainability of water supply schemes were surveyed.
  • Results indicate that some schemes are more sustainable than others.
  • The report concludes that the most effective modalities should be identified and promoted for long-term sustainability.

Key Information

• Currency: Ethiopian Birr (ETB), with 1 US$ = 11.32 ETB as of July 7, 2009.
• Fiscal Year: July 8 – July 7.
• Fiscal Federalism: The report highlights the importance of effective fiscal decentralization and the challenges in achieving it.
• Tax Revenue: Accounts for three-fourths of total revenue, but has declined over the years.
• Domestic Revenue: Remains a weak spot in Ethiopia's fiscal policy.
• Public Enterprises and EBFs: Need for transparency, accountability, and reform in their operations.
• Aid: Ethiopia has seen an increase in aid, but issues of predictability, alignment, and policy content remain.
• Inflation Impact: Has increased the cost of public infrastructure and services, requiring better budget planning and forecasting.

Abbreviations and Acronyms

• PFR: Public Finance Review
• PEFA: Public Expenditure and Financial Assessment
• EBFs: Extra-Budgetary Funds
• PEs: Public Enterprises
• MDGs: Millennium Development Goals
• PRSP: Poverty Reduction Support Paper
• WASH: Water Sanitation & Hygiene
• WASHCOM: Water Sanitation and Hygiene Committee
• IBEX: Integrated Budget & Expenditure Management System
• MTEF: Medium-Term Expenditure Framework
• DFID: Department for International Development (UK)
• CRDA: Christian Relief & Development Association
• WATSAN: Water and Sanitation
• PSNP: Productive Safety Nets Program
• PSSF: Pension and Social Security Fund
• SNNP: Southern Nations Nationalities & Peoples
• Woreda: District level administrative unit in Ethiopia
• MOFED: Ministry of Finance and Economic Development
• MOWR: Ministry of Water Resources
• ToT: Turnover Tax
• TIN: Taxpayer Identification Number
• NBE: National Bank of Ethiopia
• EU: European Union
• IMF: International Monetary Fund
• AFDB: African Development Bank
• ODA: Overseas Development Assistance
• PASDEP: Plan for Accelerated and Sustained Development to End Poverty
• DBS: Direct Budget Support
• DBST: Double Bituminous Surface Treatment
• WSSP: Ethiopian Water Supply Project
• PRF: Public Finance Review
• PIUs: Project Implementation Units
• PPESA: Privatization and Public Enterprise Authority
• FSP: Food Security Program
• FPSF: Fuel Price Stabilization Fund
• BPR: Business Process Re-engineering
• CM: Custodial & Manual Service
• CPI: Consumer Price Index
• EBF: Extra-Budgetary Funds
• ERA: Ethiopian Roads Authority
• ESL: Ethiopian Shipping Lines
• ESRDF: Ethiopian Social Rehabilitation & Development Fund
• ETC: Ethiopian Telecommunications Corporation
• GDP: Gross Domestic Product
• GNI: Gross National Income
• GOE: Government of Ethiopia
• HLF: High Level Forum
• MDRI: Multi-lateral Debt Relief Initiative
• MTEF: Medium-Term Expenditure Framework
• PFI: Public Finance Institutions
• PFM: Public Financial Management
• RF: Road Fund
• RSDP: Road Sector Development Program
• SWAP: Sector Wide Approaches
• WATSAN: Water and Sanitation
• WDI: World Development Indicators
• WDR: World Development Report

Conclusion

The 2009 Public Finance Review underscores the importance of fiscal transparency, accountability, and effective revenue mobilization for Ethiopia's sustainable development. It highlights the challenges posed by inflation, the need for reform in public enterprises and extra-budgetary funds, and the importance of improving the effectiveness of financing modalities in the water and sanitation sector. The report serves as a critical reference for policy-making and donor coordination.